Personal Finance

Why companies should focus on sustainable management

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Depleting the resource base of an organisation for short-term financial gain may force a company to stare at longer-term financial ruin.

The prospects of financial ruin is no longer a mirage and a lot has been written about long-term impact of environmental degradation on a company’s bottom line.

Environmental consciousness was a major craze in the 1990s with the advent of ISO 14001 certification. However, the tempo, drive and focus has seemingly shifted to other areas.

But, does it mean it is not a priority anymore to focus on environmental side of business? A focus on the triple side of business management - economic, social and environmental, also known as Triple Bottom Line (TBL), answers the sustainability question on a more comprehensive and wholesome way.

Managers are continuously under pressure to return increasing profits with a focus on cutting costs and increasing the Top Line. To achieve this, most have made unsustainable decisions that compromise the very survival of the company in years to come.

These managers are therefore, forced to focus on profits or economic part of business, with only cosmetic attention to social and environmental aspects. Rethinking the business in terms of its Triple Bottom Line performance is critical in establishing the foundation for sustainable business.

This requires a shift away from thinking of a business only in terms of its financial profit to shareholders, but also on saving the environment and caring about people.

This article, therefore, highlights the need for a renewed call for sustainability thinking in business. For business to be sustainable in a financial sense, companies must continue to consider, at priority and strategic level, the longer term and broader consequences of their decisions.

When sugar factories close due to lack of cane, everyone suffers. That is when the unscrupulous trader has an opportunity to bring in cheap sugar from Comesa region and divert from other sources like Brazil.

The consequence is that the local farmer suffers, the local economy suffers and the country loses in terms of negative foreign exchange outflows and tax cheats, to name only but a few.

The first dimension of a sustainable business management is economic impact. The sustainable business will consider its own economic impact on the communities in which it operates.

This includes job creation, impact on local wages, impact on real estate in close proximity to the business, tax flows, investment in disadvantaged areas, impact on public works and social services systems.

Companies that deduct, but fail to remit PAYE, Sacco savings and NSSF on time are hurting the economic justification of their very survival.

The second dimension of a sustainable business is its performance relative to societies and social justice, often referred to as social impact. The social impact of a business often refers to practices related to employees and employment with the business.

The sustainable business’s social impact would include such items as the business’s practices and policies related to working conditions, wages, adherence to employment laws, safety, diversity in hiring, opportunities for advancement for women and minorities among others.

The sustainable business also ensures that it is engaged with suppliers that share similar values. That is, being concerned with the labor practices and working conditions of companies within its supply chain to ensure that the supplies and products it purchases were produced responsibly and ethically.

Sustainable businesses will make reasonable efforts to ensure they are not purchasing from suppliers engaged in the use of child labor, or other human rights abuses.

Unfortunately, statistics is very scanty of local companies that have followed this path of ensuring their suppliers follow ethical procedures in their production processes.

The third dimension of a sustainable business is its contribution to preserving environmental quality and causing a positive environmental impact.

Numerous examples exist of companies reducing environmental costs while simultaneously improving company performance and profitability. In joining environmental efforts, companies avoid depletion of natural resources in order to maintain an ecological balance.

Being eco-friendly means thinking about the ecology of the earth and making sure the products companies consume, and the practices companies keep, have a minimal impact on the environment. The disappearing Ngong Hills did not have to be blasted away to create materials for increasing infrastructure projects if there was less and less pressure on our road network!

These practices relate to efficient use of natural resources, waste reduction, toxicity, and pollution control. For manufacturing companies, the environmental impact can be large and conscious efforts must be made to reduce waste, toxicity, and pollution within the manufacturing process. Recycling programs are often part of a sustainable company’s efforts to reduce waste and toxicity.

Companies following sustainable business processes must consider the environmental impact of suppliers in terms of services and products as well as transportation of goods. They should seek out suppliers of services and products that are environmentally friendly.

This result in the purchase of products that produce less waste, are less toxic, and generated the least amount of pollution in manufacturing and transportation. Companies should opt for local suppliers, when possible, in order to reduce the environmental impact caused through the transportation of goods. This is indeed a real case for build Kenya-buy-Kenya situation.

As with other attempts to reduce environmental impact, a move toward green procurement can offer cost savings for the sustainable business.

When a sustainable business considers water usage-often referred to as a water footprint, it is seeking ways to become more efficient by reducing its use of fresh water or increasing its recycle rate for water. For example, some businesses have collected water from sink, water fountain, shower, dishwasher, and washing machine drains, collectively referred to as greywater systems or installed rainwater collection systems to recycle water for use in landscaping, decorative water features, and to flush toilets.

When a sustainable business considers energy usage, also referred to as a carbon footprint or energy audit, it is seeking ways to become more efficient and reduce its energy misuse.

Companies should carry out an energy audit periodically to identify sources of wasted energy and accompanying opportunities to become more energy efficient.